VC Cafe

FEBRUARY 27, 2024

Everyone moved to earlier stage – part of the decline in late stage investing is the ‘baggage’ of companies that previously raised money at inflated valuations that they would struggle to justify in today’s market. I genuinely believe that the next 24-36 months will be a great vintage to invest in early stage.

Valuation 186

Valuation Software Review Generative AI Technical Review 186

Both Sides of the Table

SEPTEMBER 18, 2014

And now I have to explain to team that they’re taking more dilution than they expected if we do a down round. A down round? I have never come across a sophisticated A, B or C round venture capitalist who thinks convertible notes are a smart move for entrepreneur or investor. Me: More dilution?

Venture Capital 417

Venture Capital Liquidation Preference Valuation Term Sheet 417

YoungUpstarts

JUNE 26, 2020

Many entrepreneurs waste time talking to investors who are at the wrong stage, sector or tribe. When a VC’s website says they do “early stage” – to a VC that means a product has already been built and generating some revenue, while to an entrepreneur it means “just an idea.”. This might seem obvious, but it’s not.

Finance 205

Finance Silicon Valley Valuation Startup 205

Berkonomics

AUGUST 3, 2023

They have been burned too badly during the last decade by overvaluing businesses and finding themselves like friends and family, “stuffed” into a down round of lower valuation when a company takes its next round of financing from the next step, venture capitalists.

Private Equity 118

Private Equity Valuation Cap Table Accredited Investor 118

Both Sides of the Table

MAY 30, 2018

Many VCs will have a distribution curve where they’ll do a small number of early-stage deals (say $1.5–3 3 million invested at a $6–10m pre-money), a larger number of “down the fairway” deals ($4–5 million at a $15–25 million pre) and a few later-stage deals (say $8–10 million at a $30–40 million pre).Of

Valuation 324

Valuation Post-Money Valuation Pre-Money Valuation Cofounder 324

Berkonomics

MARCH 5, 2020

Here we expand the definitions a bit to encompass businesses that are still early stage, but perhaps beyond startup. And fifth: Competitive risk. . You may recognize these five as a slight variation on the “Berkus Method” which is often published and used by investors when valuing pre-revenue businesses.

Valuation 62

Valuation Down Round Early Stage Demand 62

Scalable Startup

JANUARY 27, 2011

Flat to negative revenue growth is a real red flag, especially for early stage companies. If you’re venture funded, things get kind of ugly -unhappy board members, cut off from communications, down- rounds to keep you going, or no more funding. Your stakeholders start to wonder what is going wrong? Press Mentions?

Revenue 22

Revenue Early Stage Down Round Software Review 22

Startup Company Lawyer

MARCH 14, 2010

In addition, I think that a “peace treaty&# between early-stage investors and startup companies on standard terms (at least at a term sheet level) is a step in the right direction. I suspect that this seems reasonable if there is basically no due diligence due to the early stage of the companies. (By Legal fees.

Finance 70

Finance Software Review Term Sheet Liquidation Preference 70

ithacaVC

NOVEMBER 14, 2014

A founder is about to raise their first round and asking me how to value their company. [1]. There’s a reason it’s so difficult to figure out – valuations have little basis in reality for early stage companies. Hopefully, it’s in high demand for good reasons, otherwise you risk a down round in the future.

Valuation 69

Valuation Startup Down Round Early Stage 69

Berkonomics

MARCH 14, 2019

Especially if you are in the early stage of growing a business, these five risks can and often do derail entrepreneurs before realizing the riches of a great exit. Of course, we are speaking of increased valuation of your company when we speak of “wealth.” So, let’s examine them and mitigate them. Make you wealthy someday.

Valuation 48

Valuation Down Round Early Stage Demand 48

The Equity Kicker

JANUARY 25, 2016

However severe our current situation is, I’m sure there will be plenty of short term negatives, including more job losses, company failures and down rounds. Startups everywhere will need to adjust their fundraising strategies and good investors will be helping them to adjust quickly – it’s much less painful that way.

Venture Capital 60

Venture Capital Angel Investor Startup Participating Preferred 60

View from Seed

FEBRUARY 19, 2015

Sometimes the only path forward is to fill a gap with a down round of funding, a B-player, or some other non-ideal option. For similar stories, practical advice, and free resources created specifically for early-stage startups, subscribe to The View From Seed. Keep at it. Be pragmatic. But sometimes you can’t.

Founder 120

Founder Startup Cofounder Business Model 120

Gust

SEPTEMBER 17, 2014

And now I have to explain to team that they’re taking more dilution than they expected if we do a down round. A down round? I have never come across a sophisticated A, B or C round venture capitalist who thinks convertible notes are a smart move for entrepreneur or investor. Me: More dilution?

Liquidation Preference 153

Liquidation Preference Valuation Term Sheet Stock 153

Berkonomics

JUNE 8, 2017

They have been burned too badly during the last decade by overvaluing businesses and finding themselves like friends and family, “stuffed” into a down round of lower valuation when a company takes its next round of financing from the next step, venture capitalists.

Private Equity 106

Private Equity Valuation Cap Table Accredited Investor 106

Both Sides of the Table

SEPTEMBER 27, 2010

There is no way for people to keep prices down – it’s a competitive market. This is evidenced by the current price creep that we’re experiencing for early-stage deals. If either condition doesn’t hold it will be hard to do anything but a flat or down round.

Liquidity Event 308

Liquidity Event Silicon Valley Seed Stage Finance 308

thebarefootvc

AUGUST 26, 2015

However, many variables come into play when investing at the early stage. A VC’s job is to spot sustainable trends while they are in formation stages, and form a point of view on the timing of the adoption of those trends.

Marketing 40

Marketing Investment Bankers Valuation China 40

thebarefootvc

AUGUST 26, 2015

However, many variables come into play when investing at the early stage. A VC’s job is to spot sustainable trends while they are in formation stages, and form a point of view on the timing of the adoption of those trends.

Marketing 40

Marketing Investment Bankers Valuation China 40

thebarefootvc

JULY 26, 2015

However, many variables come into play when investing at the early stage. A VC’s job is to spot sustainable trends while they are in formation stages, and form a point of view on the timing of the adoption of those trends.

Marketing 40

Marketing Investment Bankers Valuation China 40

VC Cafe

JUNE 10, 2022

Until now, early stage startups were relatively unaffected. According to new research by Pitchbook , the trickle down effect has already started in seed and series A startups with round sizes and valuations shrinking in size compared to 2021. The market correction has come for series A and seed startups.

Valuation 151

Valuation Marketing Venture Capital 151

Hippoland

NOVEMBER 13, 2016

But as we’ve seen, these valuations can be hocus-pocus — even at later stage rounds, we’ve seen lots of companies of late fall from grace and become massively devalued overnight when they cannot raise their next round at a higher valuation. If a company raises a good round, it gets marked up to the new value.

IRR 48

IRR Valuation Portfolio Due Diligence 48

VC Cafe

SEPTEMBER 26, 2022

Many startups that raised money in 2021 on inflated valuations that were detached from their actual value, are struggling to raise up-rounds and face difficult choices these days: down rounds, early sellout or failing altogether. A good way to think about valuation in seed/pre-seed is to reverse engineer the next round.

Founder 187

Founder Startup Valuation Pre-Money Valuation 187

Altgate

MARCH 8, 2009

There are three types of venture investing (early stage, “growth&# stage and later stage. Early stage means the first real investors in a startup when the team could be as small as 5-10 people. Early stage investing is complicated, hard work. But some will be saved. So what to do?

Later Stage 34

Later Stage Early Stage Venture Capital Portfolio 34

VC Cafe

JANUARY 29, 2024

Spoiler alert: I believe that 2024-2025 will be an amazing time to invest in early stage startups. 2023 was a rough year for Venture Capitalists and startups alike Plummeting deal volume (US down 40%, UK %50, Israel 60%) back to 2017 volumes. Those ‘band aids’ are running their course and it might get worse (i.e.

Generative AI 171

Generative AI Global Venture Capital Valuation 171

Steve Blank

NOVEMBER 2, 2009

In times when venture capital is hard to get, investors extract high costs for failure (down-rounds, cram downs , new management teams, shut down the company.) I see a lot of early-stage entrepreneurs waste too much time chasing money rather than figuring this out first.

Lean 244

Lean Silicon Valley Startup RSS 244

VC Cafe

NOVEMBER 30, 2022

Atomico’s founder Nicklas Zennstrom recently called the end of the high valuations era and urged founders and VCs to remove the stigma from down rounds. It’s enough to take a look at the global unicorn club of 1,191 startups valued at $1 billion or above to understand that challenging times are ahead for many of them.

Europe 97

Europe Balance Sheet Valuation 97

abovethecrowd.com

APRIL 20, 2016

Also, they have a strong belief that any sign of weakness (such as a down round) will have a catastrophic impact on their culture, hiring process, and ability to retain employees. Their own ego is also a factor – will a down round signal weakness? A down round is nothing. Get over it and move on.

IPO 40

IPO Term Sheet Silicon Valley Valuation 40

Scalable Startup

OCTOBER 26, 2011

It’s no longer based on a hunch, unless the company is in trouble and needs money to finish what the first round started. This problem often leads to a lowered valuation or “down round” Not a great scenario.) If the company is doing well, the second round is easier to acquire.

Mezzanine 22

Mezzanine Due Diligence IPO Angel Investor 22

This is going to be BIG.

SEPTEMBER 7, 2012

So, the idea that it's a good or bad idea to follow on, or to play in certain stages versus others--honestly, it's a lot of marketing hype and anecdotal stories that really don't play out across the law of large numbers. If you're a multi-stage investor, I get this. Down from what? Picking winners based on more information.

Later Stage 99

Later Stage Down Round Pre-Money Valuation Early Stage 99

NZ Entrepreneur

JULY 8, 2019

In the first of a three part series on early stage business investment, we asked serial entrepreneur and investor Josh Comrie what three key things New Zealand entrepreneurs must get better at when it comes to seeking angel investment. So, I went deep (currently sitting at 26 different early-stage ventures).

New Zealand 42

New Zealand Entrepreneur Valuation Dilution 42

Both Sides of the Table

JUNE 5, 2016

If a company raised a big B and/or C round and needs more money the late stage guys have the bucks and that early-stage guys often don’t. So in companies with high burn rates you can find the following: Seed funds wanting to sell the company / get a return or growth investors pushing for a recap or massive down round.

Venture Capital 150

Venture Capital Silicon Valley Burn Rate LP 150

www.paulgraham.com

APRIL 28, 2010

4 ] Seed Funding Firms Seed firms are like angels in that they invest relatively smallamounts at early stages, but like VCs in that theyre companiesthat do it as a business, rather than individuals making occasionalinvestments on the side. Angels and even VC firms occasionally do this, but they alsoinvest at later stages.

Technical Review 76

Technical Review Startup Software Review Angel Investor 76

www.quora.com

SEPTEMBER 22, 2011

Even if your company succeeds, there is absolutely no guarantee your equity will not be wiped out in a down round. Even better, executives will negotiate the acquisition price of their company down; in exchange for a larger amount of post-acquisition retentio n equity and accelerated vesting.

Equity 40

Equity Employee Founder Cofounder 40

Scalable Startup

FEBRUARY 1, 2013

Alexia Tsotsis: Are you seeing down rounds because the NASDAQ is down? Marc Andreessen: No, we have not seen down rounds yet. We have not seen down rounds yet, but consumer rounds that are happening now — consumer growth rounds are happening now at 2-4x lower prices than they were six months ago.

Software Review 22

Software Review Startup Venture Capital Stock 22

Tim Keane

AUGUST 20, 2009

  So to the extent that he sees that the quality of the investor and his/her connections and abilities is really what the early stage company is buying, the more Jason and I would agree.   New money, usually VC money, comes in and crams down those early investors and takes substantial shares from the entrepreneur. 

Milwaukee 60

Milwaukee Bootstrapping Cram Down Deal Structure 60

Both Sides of the Table

OCTOBER 18, 2015

In 2014 3 out of 12 exits were occurred at a lower valuation than the previous round. 25% “down rounds? But when you fast-forward 1 year to 2015 5 out of 7 were down rounds. As usual – the markets offer us some indication. is pretty pathetic. That’s 71% to spare you the math.

IPO 150

IPO Venture Capital LP SEC 150